1 Just Starting? Here’s 12 Things to Know
Notice the title above. It’s not things you have to learn, it’s what you need to know before you even start to trade. Because if you don’t know these things then you will soon find trading to be a painful process and you will start to look for ways to avoid the pain. There are some pains you just have to be prepared to accept.
1. No one else has all the answers and no one else can make you a successful trader. Neither is there a perfect system or plan. You will have to find one that works for you. But you do not need to do this from scratch. Seek help and accept help.
2. Try to specialise. Stick to one a or two markets or stocks or classes of assets. Get to know your specialism really well because the people you are trading against are likely specialising in only one or two assets. You cannot know everything equally well.
3. Always try to keep it simple. Occam’s Razor, an approach to problem solving dating back to at least the 13th century, says that the explanation for an observation that requires the fewest assumptions is probably the right one and should be accepted as such until proven false. It’s the same with your analysis and trading. You won’t get better by adding more indicators, or more data. Concentrate on making a few simple things work.
4. There is a lot of information in books and you might learn from them. But they that will make you a better trader. Only you can do that by taking what you learn and applying what works.
5. Trade in small amounts relative to your funds. Your trading fund is a proportion of your liquid assets and any trade must only place a small percentage of this at risk. Be careful of leverage. You can lose more than you have invested if you don’t do it right. Be wary of anyone encouraging you to increase your investment. It’s your money. More risk may be in their interests, but not in your interests.
6. You are not trading in order to be right about anything. Indeed you will be wrong a lot. Most of the time probably. Accept that. If you have a problem with accepting that you are regularly wrong, even if you don’t do anything wrong, then trading may not be for you. You are trading to make money, not to be right. Just don’t lose much when you are wrong.
7. You don’t need to tell anyone else about your trading. It’s not a secret, but if your aim in trading is to gain the respect of others then you should not be trading. And when you are wrong you will start to hide it from them, and perhaps from yourself. You are trading to make money. Nothing else.
8. Don’t be looking for explanations for why the market has moved. Just accept that it has moved, unless there is a really fundamental change occurring. There is always plenty of news every day and plenty of people to explain the news and how it is impacting. Ignore them. They will be talking about something else tomorrow because that is their job. It’s not your job to listen.
9. Every emotion you experience is a liability if you allow it to affect your trading decisions. You must never, ever trade on emotion.
10. There are an infinite number of opportunities in the future but none at all in the past. So unless you have something to learn from reviewing what you have done then make sure to leave a trade behind when it is finished. Do not let it affect your next trade.
11. You are so unimportant that as far as the market and other market operators care you don’t exist. It’s not just that the market doesn’t care about you and what you do and what you think or hope for; it does not even care to know that you exist. The market will never know anything about you. The flow of information is always one way, from the market to you.
12. Much of what applies in the rest of the world is meaningless in the market. Nothing has worth other than what someone else will pay for it. The market has no memory. Every trade is independent. Unless you lose your money, nothing you do today has any real impact on what you do next. It does not matter tomorrow how good you are today.